UK appeals court not amused: Panasonic risks appellate loss to Xiaomi or antisuit injunction plus sanctions in case of AASI-Industry News-Shenzhen deep trust patent Agency Co., LTD

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UK appeals court not amused: Panasonic risks appellate loss to Xiaomi or antisuit injunction plus sanctions in case of AASI

Release Time：

2024-09-27

Context: A few months ago, Mr Justice Richard Meade of the High Court of Justice for England & Wales (EWHC) expressed his disappointment at Panasonic’s gamesmanship (July 17, 2024 ip fray article). Despite initially favoring the idea of a global FRAND determination in the UK, which Xiaomi also embraced, Panasonic’s UK counsel went back to the court and made it clear that they’d rather gain leverage over Xiaomi from standard-essential patent (SEP) injunctions they are seeking in the Unified Patent Court (UPC) and German national courts. Mr Justice Meade wrote a letter to his UPC and German colleagues just to make them aware of the likely schedule for the rate-setting proceedings before him and the subsequent judgment (July 31, 2024 ip fray article). But another judge, Mr Justice Thomas Leech, denied Xiaomi’s request for a declaration that, as a result of the commitments both parties had made to the UK proceedings, they already had an interim license to Panasonic’s SEPs (July 8, 2024 ip fray article), citing the lack of a useful purpose.

What’s new: On Thursday (September 19, 2024), a generally eventful day on the SEP front (September 20, 2024 ip fray article), the England & Wales Court of Appeal (EWCA) heard Xiaomi’s appeal of the denial of an interim license. None of the judges made a single statement to suggest that the appellate panel condones Panasonic’s course of action. Instead, the focus appeared to be more on what the appropriate procedural response should be: interim license or antisuit injunction? An implementer who is licensed cannot be enjoined over an alleged infringement.

Direct impact: The appeals court appeared fully aware of the urgency of the matter, also in light of an upcoming FRAND trial before the UPC’s Mannheim Local Division (LD). A decision will likely come down soon. There are different possibilities now, but this is an unusual case in which an antisuit injunction might actually be the next step. German courts (particularly the Munich I Regional Court) discouraged them through the grant of preemptive anti-antisuit (AASI) and anti-anti-anti-antisuit (AAAASI) injunctions. Here, however, the circumstances are such that Panasonic had voluntarily committed to a UK FRAND determination (and wanted Xiaomi to commit to it as well), and the appeals court said that if Panasonic were to seek an AASI, it would be sanctioned in the UK for breach of its commitment to the EWHC.

Wider ramifications: This SEP dispute has evolved in a unique way, making further developments of an unprecedented kind more likely than the ordinary course of business. With a view to the Mannheim LD trial in little more than two weeks (LinkedIn post by ip fray), the latest UK developments could actually result in major simplification. Whether Xiaomi is (as per a UK declaration) licensed or whether the UK judges believe that it is entitled to an antisuit injunction, it even becomes questionable now whether there is any point in the Mannheim LD spending time on FRAND questions that both parties previously agreed to have adjudicated elsewhere. That same week, the Mannheim LD will also hear Panasonic v. OPPO, a dispute with a rather different pattern that involves a FRAND counterclaim by OPPO.

The EWCA streamed the hearing via YouTube, and the recordings of the first part and the second are still available there.

Anyone who tries to quickly get a feel for the direction the court is leaning should actually listen to the second part first, just to see what a skeptical court Panasonic’s counsel faced. For instance, Panasonic was scolded for “seeking inconsistent relief there” (meaning that they want a license to result from the UK proceedings, but injunctions in Germany).

Panasonic argued that German courts take account of both parties’ conduct (though “taking account” is not the same as “giving weight”). The court noted that both Xiaomi and Panasonic recognized they need a FRAND determination in the UK. Therefore, one judge noted that would not be “a matter of imperialism” to grant Xiaomi relief (possibly in the form of an antisuit injunction), given that the parties themselves had said the English court should decide.

Unlike Mr Justice Leech, the appellate judges appeared to have understood the German situation, which is such that SEP holders are able to obtain injunctions even with supra-FRAND royalty demands. That doesn’t mean that everyone who wins in Germany seeks supra-FRAND royalties, but the system is so flawed there that it can happen. The appeals court’s profound knowledge of how SEP injunctions are granted in Germany was also reflected by the remark that “no one’s a Section 315 application,” meaning that no one has actually let a German court determine a FRAND rate on the basis of the implementer taking a license but reserving the right to have a court review the SEP holder’s demand.

To be precise, Apple did so against Motorola in the early 2010s and the case went to trial in the Mannheim Regional Court, but was settled before a judgment came down. What happened in that case would have supported Xiaomi’s arguments in the UK proceedings, as the judge-rapporteur explained in open court that the rate sought by Motorola was completely unsupported by the real-world license agreements they presented. But that was the rate Motorola was seeking when the Mannheim Regional Court enjoined Apple.

Panasonic’s counsel tried to distinguish a promise to the EWHC (“solely to the Court”) from a promise to Xiaomi regarding the license. That line of thinking got no traction. What served Panasonic’s purposes even less was the de facto admission that they wanted to benefit from foreign injunctions: Panasonic’s counsel generally said they could “do better.” That was immediately understood by the appeals court as meaning a higher royalty rate than the one that would be set by a UK court.

Lord Justice Richard Arnold, the panel member with more SEP/FRAND and generally patent expertise than the others, apparently considered it to weigh (whether decisively or not) in favor of a declaration of an interim license that a SEP holder willing to grant a license on court-determined terms would want to be paid sooner rather than later, and in the meantime let the UK FRAND proceedings run their course. So someone who wants to forgo those near-term royalty payments in order to seek foreign injunctions must be trying to extract supra-FRAND rates.

Lord Justice Arnold also “commended” the parties for having agreed to conclude a license agreement based on court-determined terms, and asked why one would then disrupt the process (through the potential enforcement of injunctions in other jurisdictions).

When Xiaomi’s lead counsel on appeal (Daniel Alexander KC) spoke, the appeals court appeared to be struggling with only one question: should there be a declaration of an interim license as sought by Xiaomi or wouldn’t it be more appropriate and conventional for Xiaomi to seek an antisuit injunction, which one appellate judge describged as a “simple and straightforward recognized English law solution”?

Xiaomi’s counsel explained that he was “not saying there are no grounds for [an antisuit injunction]” but that German courts might then deem Xiaomi an unwilling licensee. There is indeed case law from the Munich I Regional Court to that effect. And Panasonic could seek an AASI from a German court (they could also try in the UPC, though the UPC’s ability to grant one is another question).

The appeals court had a stern warning for Panasonic: if they filed for an AASI, they’d be in breach of an undertaking to the UK court. In other words, the UK court might (possibly even at its own initiative) sanction Panasonic for that course of action.

Xiaomi’s counsel argued that an interim license would provide interim payments to Panasonic, while an AASI would not have that effect. And he argued that Xiaomim’s proposal of actually making a payment of a reasonable sum (which could still get higher if Panasonic persuaded the court that a higher rate is FRAND) went further than Huawei v. ZTE, which the UK judiciary is now (post-Brexit) free to deviate from but which is still underlying the applicable SEP case law in the UK, particularly Unwired Planet v. Huawei.

Mr. Alexander did not want to be too specific in open court, but referred to a “communication received only last Friday” that contained numbers that he argued showed to the appeals court that “the probability of Panasonic’s approach being the correct one is very low.” That could relate to a royalty demand. At least it is not easy to think of why any “numbers” would be contained in a communication and relevant to this case if they were not related to the royalty dispute.

Given that the court has no love for Panasonic’s attempt to use the English courts for its purposes unless and until some other jurisdiction enables a better deal for Panasonic, it is hard to imagine that Mr Justice Leech’s decision would be affirmed in a way that Panasonic would appreciate. It would be a Pyrrhic victory for Panasonic if the judgment affirmed the denial of a declaration of an interim license but strongly encouraged a motion for an antisuit injunction.

Panasonic’s UPC and German counsel cannot be blamed. They recommended what works best in German national court. But Panasonic may have underestimated the blowback this would draw from the UK judiciary, at two levels by now. Those are the intricacies of multi-jurisdictional disputes. But, as stated further above, this could end up simplifying things greatly for the UPC. Should the UK decision come down before the Mannheim FRAND trial, and should it make it clear that Panasonic at some point opted for a UK FRAND determination and Xiaomi accepted, the unique situation (in past UK SEP disputes there was one side that wanted a UK FRAND determination, such as Unwired Planet, and one that opposed it, such as Huawei in that case) could also have unexpected consequences in the UPC.

Of course, until the EWCA decides, anything can happen. But the Thursday hearing does not make it very likely that a two-judge majority would side with Panasonic.

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